Patent Reform Efforts Stall in Congress, but Continue Elsewhere

Patent reform legislation efforts stalled after Senate Judiciary Committee Chairman Patrick Leahy announced that he was taking his patent reform bill off the committee’s calendar. But this does not mean an end to the necessary fight against patent trolls. Rather, for the time being it just shifts the ongoing battle to more incremental and potentially more effective approaches to reining in abusive litigants.

On May 21, just one day before the Judiciary Committee was scheduled to mark up the patent reform bill, Senator Leahy dropped the measure. He cited the lack of broad bipartisan support and serious concerns that many of the bill’s provisions would, as he put it, overly burden “companies and universities who rely on the patent system every day” and impose “severe unintended consequences on legitimate patent holders who employ thousands of Americans.”

We appreciate Senator Leahy’s concerns about pending proposals being burdensome and potentially causing unintended consequences, and we agree that dropping the current measure was the right move.  Earlier we wrote to Representative Bob Goodlatte, who sponsored the House’s patent reform bill, to express our concern that overreaching legislation could not only encroach on an independent judiciary and lead to unjust results in many cases, but it could unduly burden all patent owners, by making patent litigation more protracted, expensive, and burdensome regardless of the patentee’s identity and business model.

With litigation reform legislation on the back burner, there are still several avenues being taken on abusive patent litigation.  One targeted approach is being taken by a growing number of state legislatures and state attorneys general who have begun using consumer protection laws to clamp down on patent trolls who use demand letters to extort small businesses for nuisance “settlements.” A series of White House executive orders issued in February also promise to curb patent litigation abuse, boost patent quality, and strengthen the patent system without risking the harm to the innovation system that could arise from overly-aggressive changes to patent law itself. And an important part of improving patent quality in the US is fully funding the US Patent and Trademark Office, an initiative that we fully support.

The federal courts also addressed key patent litigation issues.  Related to the controversial fee-shifting legislative proposals, the district courts will begin applying the recent Octane and Highmark Supreme Court decisions, which granted greater leeway to judges in making abusive patent litigants pay attorneys’ fees.  Time will tell if the new fee-award judicial regime will lessen the pressure to implement legislation.  The Eastern District of Texas, the most popular venue for patent litigation in the US, has added a new Track B docket, which specifically addresses a number of proposals considered by Congress, including early disclosure of certain information, such as licensing information, as well as very early disclosure of both the damages sought and the method of calculating those damage.  All of these steps are being taken against the backdrop of the imminent FTC study, which aims to collect reliable empirical data about patent licensing that we expect will provide a truer picture of what’s really going on in our business.

Another positive development recently is the growing movement within the patent licensing industry itself to develop a voluntary code of conduct or standards of ethical behavior, just like responsible members of other industries do.  That’s why Conversant has committed itself publicly to a set of ethical guidelines for patent licensing. As I wrote in an op-ed in Washington’s The Hill newspaper May 14, “industries grow faster and create more jobs when they police themselves rather than wait for the often-heavy hands of legislation and regulation to deal with the bad actors that lurk in every field of economic activity.”